Members of the Financial Accounting Standards Board say they wish accountants had the confidence to use sound professional judgment when creating corporate financial reports.

FASB members deplore the current state of corporate financial accounting in a new response to a U.S. Securities and Exchange Commission report released in June 2005.

The SEC report dealt with efforts to report on the finances of a wide variety of “off-balance sheet” activities, entities and investments.

One key section of the SEC report dealt with accounting for defined benefit pension plans and other post-employment benefits.

Today, the FASB needs help from the SEC and the Public Company Accounting Oversight Board to deal with “powerful forces,” such as pressure to burnish company earnings and fears of lawsuits, that block efforts to improve accounting, FASB members write in their response to the SEC report.

“Many of those forces engender a culture that results in a constant demand for detailed rules, exceptions, bright lines, and safe harbors,” FASB members write. “We also continue to receive regular demands from public and private companies and industry groups for special exceptions and accounting treatments to suit their particular business models, practices, and objectives.”

Many companies are including long disclosures with their financial reports, but many of the disclosures consist of chunks of legalistic boilerplate that fail to communicate important information, FASB members write.

FASB members say that they hope to complete one phase of a retirement benefits accounting project this year and a second phase in the next several years.

The first phase will deal with an effort to require employers to include deficits and surpluses in retirement benefit plans in their statements of financial position, rather than quarantining that information in the footnotes.

The second phase will deal with topics such as consolidation of retirement benefit trusts and guidance on the assumptions used in measuring benefit obligations, FASB members write.

A link to the FASB document is on the Web at Document Link